Most buyers hire an experienced home inspector before buying. The inspection includes pest, septic system, radon, mechanical and structural. While buyers and sellers understand the purpose is to assist the buyer in deciding to purchase the property, they do not always know their rights and obligations before and after the inspection.
If the inspection reveals problems, the buyer may request the seller to fix them. The fact an inspection uncovers problems does not automatically permit a party to terminate the contract nor does it necessarily obligate the seller to make repairs. The provisions of the contract determine the parties' rights. Market conditions may also play a role. In a seller's market, a seller is less likely to make costly repairs, since there may be numerous buyers willing to purchase the property without them.
All parties must carefully review the inspection provisions of their contract since they are not all the same. While most inspection clauses are similar, there are variations that alter parties' rights. The Rhode Island Realtors Association has its own sales agreement forms. The Association's 1999 version states a buyer may terminate the contract if the inspection reveals the property has a substantially, materially deficient condition. Unfortunately, that version does not define what constitutes a deficient condition. The Association's 2000 version defines the phrase as something that has a significant adverse effect on the value of the property that would significantly impair the health of the occupants, or shorten the life expectancy of the property. It also states, however, that a deficient condition does not include items the buyer had actual knowledge or written notice of before signing the agreement. Further, some real estate agencies use their own form of contract containing inspection provisions that are different from the Association's versions. Parties should not assume the contractual inspection provisions are exactly the same as in previous or simultaneous transactions.
In addition to inspections, Rhode Island law requires a seller to disclose known defects in writing. Defects that could be substantially, materially deficient conditions include problems with the septic system, wet basements, or high radon levels. The buyer's prior knowledge of a defect can be very important. If the buyer views the property prior to making an offer and sees a crack in the foundation or water in the basement, the seller might argue the condition was disclosed, and therefore, the buyer is prevented from terminating the contract after the inspector points out those conditions.
Generally, if a seller does not disclose a known defect, the buyer may sue the seller for damages. In some situations a defect is so evident the seller is not liable for failure to disclose. In a local case, the court ruled the buyer could not sue the seller for failure to disclose an erosion problem, because the property was on the water. The court reasoned that erosion is inherent with waterfront property and the buyer should have understood that fact.
In conclusion, parties should understand their rights and obligations under the inspection provisions prior to signing a contract.
This article contains general information and is not intended to give legal advice. If you have specific questions, you are encouraged to contact an attorney. The R.I. Supreme Court licenses all lawyers in the general practice of law. The court does not license or certify any lawyer as an expert or specialist in any field of practice.